20/07/2016. Weathering the Storm. Options for companies in a difficult economic climate

Transcription

1 Weathering the Storm Options for companies in a difficult economic climate 1 1

2 Economic outlook for Credit: AlixPartners, A Race Against the Clock (June 2016) 2 2

3 Uncertainty on the horizon? 3 3

4 Overview of presentation Companies Act (Cap. 50) Schemes of Arrangement Part VII, Section 210 Judicial Management Part VIIIA, Sections 227A-X Winding up Part X Voluntary winding up Division 3 Compulsory winding up Division 2 4 4

5 Overview of presentation Different options available to a company or a creditor in a difficult financial climate Schemes of arrangement Judicial management Winding up Outline of the options, and basic advantages 5 5

6 Schemes of arrangement 6 6

7 What is a Scheme of Arrangement? Court of Appeal, RBS v TT International Ltd [2012] Useful democratic process Claims of creditors to be compromised or varied Sanctions a process to restrain the minority from frustrating the will of the majority To implement a beneficial scheme of a distressed company More beneficial than the likely alternative: liquidation 7 7

8 Advantages of a Scheme Applies to solvent and insolvent companies Allows a company to reach a compromise with its creditors Does not require unanimous consent A moratorium can be imposed 8 8

9 The Scheme Process Application to Court to convene meeting of creditors Court makes order for scheme meeting to be convened Proceedings against the company Company notifies creditors of scheme meeting Company holds scheme meeting Creditors vote on scheme >50% in number >75% in value Application to Court to sanction the scheme Court makes order for scheme to be sanctioned Company proceeds to implement the scheme 9 9

10 Judicial management 10 10

11 Judicial Management Pan-Electric saga of 1985 JM regime introduced in 1987 Modelled after similar regime in the UK 11 11

12 Advantages of Judicial Management Opportunity for financially troubled but viable companies to rehabilitate themselves Provide a breathing space for plans to be implemented to achieve corporate rescue Dr Richard Hu, Minister for Finance 5 May 1986 Second Reading of the Companies (Amendment Bill) 12 12

13 Requirements for Judicial Management Sections 227A and 227B of the Companies Act Survival of the company, in whole or in part Company is unable to pay its debts One of the following purposes can be achieved Approval of a scheme or compromise Not opposed by secured creditor More advantageous realisation than winding up 13 13

14 Effect of Judicial Management Order Management of the company Director(s) Existing and potential proceedings against the company Winding up applications Judicial manager Receivers and managers Section 227B Section 227D 14 14

15 Winding up 15 15

16 Why wind up a company? Company is solvent Corporators no longer wish to carry on business Assets to be distributed to shareholders Liquidation is a step in a scheme of arrangement or amalgamation Company is insolvent Liabilities > assets Creditors have claims against the company which the company cannot pay There is some prospect of wrongdoing by the management of the company 16 16

17 Winding up Does the company have more assets than liabilities? Yes Solvent winding up No Insolvent winding up Members voluntary winding up Creditors voluntary winding up Compulsory winding up 17 17

18 Members voluntary winding up Company has more assets than liabilities is solvent Who initiates? Directors Assess that the company can pay its debts within 12 months after commencing winding up Liquidator assesses that company cannot pay its debts in full within 12 months Proceed as a CVL Statutory declaration + Statement of Affairs 5 wks Meeting of members Proceed as an MVL Special resolution Appointment of liquidator 18 18

19 Creditors voluntary winding up Company s assets outweigh its liabilities is insolvent Who initiates? Directors Assess that the company cannot carry on business by reason of its liabilities Statutory declaration Appointment of provisional liquidator 4 wks Meeting of members Meeting of creditors Special resolution Appointment of liquidator Proceeds as a CVL Creditors choice prevails 19 19

20 Compulsory winding up Court-ordered liquidation Most common mode of winding up Company unable to pay its debts May be initiated even if company is already under voluntary liquidation 20 20

21 Compulsory winding up Who initiates? Company unable to pay its debts Creditor Presumed unable to pay Statutory demand 3 wks Winding up application Court orders that company be wound up Sum exceeds S$10,000 Liquidator may be nominated by petitioner 21 21

22 Consequences of winding up Existing and potential proceedings against the company Management of the company Director(s) Take in the assets of the company Assess proofs of debt submitted by creditors Liquidator Decide whether to continue with contracts Investigate into the affairs of the company Dissolve the company 22 22

23 END Eddee Ng / Keith Tnee Tan Kok Quan Partnership 23 23